The S&P 500 just delivered back-to-back years of 20%-plus returns — and it’s on pace to make it three in a row in 2025.
Meanwhile, the Nasdaq-100 has more than doubled during this stretch.
So using even the most basic logic, you’d think: There’s no way this is Year 1 of a bull market… right? After gains like that, it has to be Year 3 — probably even already Year 4.
But yesterday I had a long conversation with one of the greatest to ever do it, my friend and mentor Mike Hurley.
If you don’t know Mike, here’s all you need to know: In 2008, one of the most brutal years in market history, he won the Lipper Award for Best Long/Short Manager (ranked No. 1 out of 90). Absolute legend.
Mike Hurley, CMT is the Chief Market Strategist at Highland Capital Management.
Lately, Mike has been calling some of the top technicians in the country asking one question:
“Is this actually Year 1 of a bull market?”
And the more we talked, the more it got me thinking…
New Bull Market Breadth
Mike is looking at the percentage of NYSE stocks trading above their 40-week moving average — basically the higher-timeframe version of the 200-day. Forty weeks is roughly 200 trading days, so it lines up almost perfectly.
That measure pushed above 40% in late spring, and more recently it broke through the key 60% threshold — a level you tend to see in strong, healthy bull markets.
Now, most professionals think we’re in Year 4 of the current cycle. I’ve already shown you the stats: three straight years of historic returns. But Mike makes a different argument — that we actually saw a bear market earlier this year, brief as it was.
This is where it gets interesting, because for me historically, a bear market requires both price and time. My friend Ari Wald, Head of Technical Analysis at Oppenheimer, uses an 18-month low in the S&P 500 as his time component. I like that approach.
But Mike is focused purely on price behavior across thousands of stocks. And he points to those washout breadth readings in April — that same percentage-above-40-week measure collapsed below 20%, hitting classic reset levels.
For Mike Hurley, it’s not about time. It’s about the price behavior of the entire market.
Now Add Historic Pessimism
Mike didn’t come to me with a sentiment thesis — though he knew full well how extreme the pessimism was earlier this year when I brought it up.
That was the first thing I thought of.
If Mike is telling me breadth hit washout levels consistent with a bear market… and if he’s calling this Year 1 of a new bull market… then sentiment lines up with that, doesn’t it?
That’s how I’m thinking about it. We saw some of the most extreme pessimism ever recorded. By certain measures, investors were more bearish this year than they were during COVID… or even the Great Financial Crisis.
When breadth and sentiment both scream “reset,” you pay attention.
So How High Can We Go?
If Mike is right — and this really is Year 1 of a new bull market — then what does that mean for stock prices?
By my math, it probably means we’ve got a lot more upside ahead. Even after back-to-back 20%-plus returns for the S&P 500… and the Nasdaq up more than 130%?
If there’s one thing more than 20 years in this business has taught me, it’s this: You have to keep an open mind. We don’t know what the market is going to do.
But here’s the good news — no one else knows either.
So I talk to smart friends like Mike Hurley. I share ideas, they give me feedback, and they call me with theirs. And if you know me, you know I have absolutely no problem telling them what I think — whether they like it or not.
That’s the whole point: keeping an open mind.
So… how high can we go?
Based on Mike’s work studying 23 bull market cycles going back to 1932, the S&P 500 could be somewhere near 9,500 by March 2028.
That would put this cycle right in line with the historical average — if this is truly Year 1.
And let me just say, if Mike is right, a lot of people are going to completely lose their minds.
Most investors are not open-minded. They’ve spent the past six months fighting one of the greatest runs in stock market history, clinging to conspiracy theories about valuations, the economy, global trade — you name it. It’s been sad to watch… for them, anyway.
So what’s the real pain trade here? What outcome breaks the most brains? Where is everybody wrong?
Mike being right.
If this is Year 1 of a new bull market, the public meltdowns are going to be biblical.
Grab your popcorn.
Stay sharp and keep an open mind,
JC Parets, CMT
Founder, TrendLabs